stakeholder is a party who affects, or can be affected by, the company's actions. The stakeholder concept was developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, business purpose and corporate social responsibility
Traditional view v.s new theory
In the traditional view of the firm, the shareholders or stockholders are the owners of the company, and the firm has a binding fiduciary duty to put their needs first, to increase value for them. In older input-output models of the corporation, the firm converts the inputs of investors, employees, and suppliers into usable (salable) outputs which customers buy, thereby returning some capital benefit to the firm. By this model, firms only address the needs and wishes of those four parties: investors, employees, suppliers, and customers. However, stakeholder theory argues that there are other parties involved, this includes not only its vendors, employees , and customers, but even members of a community where its offices or factory may affect the local economy or environmental .government bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, and the public at large. Sometimes, according to the new theory of Post, Preston, Sachs (2002), called Stakeholder view theory ,competitors are counted as stakeholders. Example
For example, in the case of a professional landlord undertaking the refurbishment of some rented housing that is occupied while the work is being carried out, key stakeholders would be the residents, neighbors (for whom the work is a nuisance), and the tenancy management team and housing maintenance team employed by the landlord. Other stakeholders would be funders and the design and construction team.
In corporate responsibility
In the field of corporate governance and corporate responsibility, a major debate is ongoing about whether the firm or company should be managed for stakeholders, stockholders (shareholders), or customers. Proponents in favor of stakeholders may base their arguments on the following four key assertions:can best be created by trying to maximize joint outcomes. For example, according to this thinking, programs that satisfy both employees' are doubly valuable because they address two sets of stakeholders at the same time. There is even evidence that the combined effects of such a policy are not only additive but even multiplicative. For instance, by simultaneously addressing customer wishes in addition to employee and stockholder interests, both of the latter two groups also benefit from increased sales.
2) Supporters also take issue with the preeminent role given to stockholders by many business thinkers, especially in the past. The argument is that debt holders,also make contributions and take risks in creating a successful firm.
3) These arguments would matter little if had complete control in guiding the firm. However, many believe that due to certain kinds of structures, top managers like are mostly in control of the firm.
4) The greatest value of a company is its image and brand. By attempting to fulfill the needs and wants of many different people ranging from the local population and customers to their own employees and owners, companies can prevent damage to their image and brand, prevent losing large amounts of sales and disgruntled customers, and prevent costly legal expenses. While the stakeholder view has an increased cost, many firms have decided that the concept improves their image, increases sales, reduces the risks of liability for and makes them less likely to be targeted by pressure groups, campaigning groups and NGOs.
Table of Contents
Concept
stakeholder is a party who affects, or can be affected by, the company's actions. The stakeholder concept was developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, business purpose and corporate social responsibilityTraditional view v.s new theory
In the traditional view of the firm, the shareholders or stockholders are the owners of the company, and the firm has a binding fiduciary duty to put their needs first, to increase value for them. In older input-output models of the corporation, the firm converts the inputs of investors, employees, and suppliers into usable (salable) outputs which customers buy, thereby returning some capital benefit to the firm. By this model, firms only address the needs and wishes of those four parties: investors, employees, suppliers, and customers. However, stakeholder theory argues that there are other parties involved, this includes not only its vendors, employees , and customers, but even members of a community where its offices or factory may affect the local economy or environmental .government bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers, and the public at large. Sometimes, according to the new theory of Post, Preston, Sachs (2002), called Stakeholder view theory ,competitors are counted as stakeholders.
Example
For example, in the case of a professional landlord undertaking the refurbishment of some rented housing that is occupied while the work is being carried out, key stakeholders would be the residents, neighbors (for whom the work is a nuisance), and the tenancy management team and housing maintenance team employed by the landlord. Other stakeholders would be funders and the design and construction team.
In corporate responsibility
In the field of corporate governance and corporate responsibility, a major debate is ongoing about whether the firm or company should be managed for stakeholders, stockholders (shareholders), or customers. Proponents in favor of stakeholders may base their arguments on the following four key assertions:can best be created by trying to maximize joint outcomes. For example, according to this thinking, programs that satisfy both employees' are doubly valuable because they address two sets of stakeholders at the same time. There is even evidence that the combined effects of such a policy are not only additive but even multiplicative. For instance, by simultaneously addressing customer wishes in addition to employee and stockholder interests, both of the latter two groups also benefit from increased sales.
2) Supporters also take issue with the preeminent role given to stockholders by many business thinkers, especially in the past. The argument is that debt holders,also make contributions and take risks in creating a successful firm.
3) These arguments would matter little if had complete control in guiding the firm. However, many believe that due to certain kinds of structures, top managers like are mostly in control of the firm.
4) The greatest value of a company is its image and brand. By attempting to fulfill the needs and wants of many different people ranging from the local population and customers to their own employees and owners, companies can prevent damage to their image and brand, prevent losing large amounts of sales and disgruntled customers, and prevent costly legal expenses. While the stakeholder view has an increased cost, many firms have decided that the concept improves their image, increases sales, reduces the risks of liability for and makes them less likely to be targeted by pressure groups, campaigning groups and NGOs.